Enticing offer could persuade Anglo American
Xstrata's approach comes at a time when many Anglo shareholders are somwhat disgruntled
The offer comes at a time when many Anglo shareholders are somewhat disgruntled, feeling burned by the dividend cut earlier this year and upset that CEO Cynthia Carroll's cost-cutting programmes have yet to offset the negatives stemming from recent pricey acquisitions. Likewise, Xstrata CEO Mick Davis is under similar pressures to rein in costs at operations.
If Xstrata, or another miner, is able to make an enticing offer, Anglo may indeed agree to be absorbed by one of its peers. Other bidders could include Vale, which attempted to purchase Xstrata last year but could not come to terms with Xstrata's major shareholder, commodity trading firm Glencore, over the marketing of Xstrata's products. Anglo's assets would immediately bolster Vale's positions in coal and copper, both of which are of strategic importance to the Brazilian firm. We are leaving our fair value estimate for Anglo unchanged for now and will be watching the negotiations closely.